College Costs

The Wall Street Journal takes our elite colleges and universities to task for the high price of attendance coupled with their enormous endowments. 

While private foundations have been required for decades to shell out 5% of their total assets annually, universities decide for themselves and average close to 4%. The difference may seem small, but the money at stake is very large. Harvard's endowment is $35 billion, and growing, with implications that Fay Vincent illuminates nearby. Mr. Grassley wants to know why rich schools don't spend more of their money to reduce ballooning tuition. (snip)

Ironically, these government handouts are creating the tuition problem. Tuition has risen about three percentage points faster than inflation every year for the past quarter-century. At the same time, the feds have put more and more money behind student loans and other financial aid. The government is slowly becoming a third-party tuition payer, with all the price distortions one would expect. Every time tuition rises, the government makes up the difference; colleges thus cheerfully raise tuition (and budgets), knowing the government will step in.

As a result, "colleges have little incentive to cut costs," says economist Richard Vedder, the author of "Going Broke by Degree: Why College Costs Too Much." Mr. Vedder explains that there are now twice as many university administrators per student as there were in the 1970s. Faculty members are paid more to teach fewer hours, and colleges have turned their campuses into "country clubs." Princeton's new $136 million dorm, according to BusinessWeek, has "triple-glazed mahogany casement windows made of leaded glass" and "the dining hall boasts a 35-foot ceiling gabled in oak and a 'state of the art servery,' " whatever a servery is.

One should note that the trends at these elite universities (and the same is true at the major public research institutions) have avoided our state.  One thing you cannot say about our universities is that they have more money than they know what to do with.   This report also shows the shortsightedness of our federal representatives who call for more and more spending on higher education without looking at how the colleges and universities spend their money.